Chancellor George Osborne has unveiled plans to speed up payments by debit
cards, credit cards and cheques as part of wider banking reforms.

Outlining the Government's Banking Reform Bill this morning, Mr Osborne said he wanted to open up the payments system to new players enabling both customers and businesses to move their money more quickly.

This will build on reforms to give banks a strict seven-day deadline to switch customers' current accounts to a rival, which are set to come into force in September.

Comparing the payments system to the electricity grid, Mr Osborne told bankers in Bournemouth the high street was too heavily dominated by four big banks, which new entrants have to turn to in order to use the payments system.

He said: "Why, in the age of instant communication, do small businesses have to wait for several days before they get their money from a credit or debit card payment?

"Why is it that big banks can move their money around instantly, but when a small business wants to make a payment it takes days?"

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He added: "The system isn’t working for customers, so we will change it. I can announce today that the Government will bring forward detailed proposals to open up the payment systems.

"We will make sure that new players in the market can access these systems in a fair and transparent way."

The Chancellor described plans to make it easier for customers to move banks as a "revolution in customer choice".

The changes will mean customers can sign up to a new bank and their direct debits and standing orders will be switched for them with "no hassle", he said.

Kevin Mountford, head of banking at comparison website MoneySupermarket.com, said: “Increased competition in the current account market and the creation of the new switching rules is a real win for people in the UK.

"The changes to the banking system and today’s comments from George Osborne put current account holders back on the front foot and encourages people to make a move if they’re not currently happy with the value they’re getting from their accounts."

Mr Osborne pledged to "reset" Britain's banking system in his speech this morning, warning that banks will be broken up if they ignore rules to ring-fence their investment and retail operations.

Mr Osborne also confirmed plans to set up a new watchdog and hand back responsibility to the Bank of England to keep the banking system safe, which he said would be the "super cop" of the financial system.

The Banking Reform Bill, which builds on the recommendations of the Independent Commission on Banking, is being sent to Parliament today and should be law within a year.